Property prices in international markets have escalated at a rapid pace in the past few years, buoyed by substantial foreign buying in prime markets. Malaysia is no exception to this rule and as a consequence, many first-time buyers in the country have found themselves unable to afford to buy their first home.
As the affordability gap increases, the Malaysian government have been pro-active in assisting first-time buyers since the 'My First Home' scheme was introduced in 2011. The scheme offers assistance with up to 100% borrowing, of which 10% is guaranteed by Malaysian mortgage firm Cagamas.
However, the scheme initially faced criticism for its strict lending criteria that prevented many from being approved for the program, resulting in muted take-up.
More measures for the affordable housing sector
The 2015 budget is set to see the government unveiling more measures for the affordable housing sector including the comeback of the full loan facility under the My First Homes Scheme, according to press reports.
To be eligible for assistance through the scheme, applicants must be Malaysian citizens to the age of 35, who are first-time buyers of owner-occupied residential property. The approved property price range is between €24,000 and €97,000, with single borrowers on incomes not exceeding €1,200 monthly, €2,400 for joint-applicants.
The debt to income Ratio (DTI) is set at no more than 60% of the net monthly income of applicants, or the maximum financing limit of the participating bank, whichever is lower.
Malaysian homebuilders are expected to step up delivery of affordable housing stock to respond to the improved lending criteria of the My First Home scheme which is set to boost first-time buyers significantly.
In terms of Malaysia's real estate sector, increased uptake of properties at the affordable end will help to underpin growth in the market overall. Property prices in prime areas have become vastly inflated as a result of aggressive competition among wealthy foreign investors, forcing values up nationally and 'My First Home' may possibly serve to redress the balance.